TY - JOUR
AU - Krueger,Alan B.
AU - Meyer,Bruce D.
TI - Labor Supply Effects of Social Insurance
JF - National Bureau of Economic Research Working Paper Series
VL - No. 9014
PY - 2002
Y2 - June 2002
DO - 10.3386/w9014
UR - http://www.nber.org/papers/w9014
L1 - http://www.nber.org/papers/w9014.pdf
N1 - Author contact info:
Alan B. Krueger
Industrial Relations Section
Firestone Library, Room A2H
Princeton University
Princeton, NJ 08544
Tel: 609/258-4046
Fax: 609/258-2907
E-Mail: akrueger@princeton.edu
Bruce D. Meyer
Harris School of Public Policy
University of Chicago
1155 E. 60th Street
Chicago, IL 60637
Tel: 773/702-2712
Fax: 773/702-0926
E-Mail: bdmeyer@uchicago.edu
M2 - featured in NBER digest on 2002-12-01
AB - This chapter examines the labor supply effects of social insurance programs. We argue that this topic deserves separate treatment from the rest of the labor supply literature because individuals may be imperfectly informed as to the rules of the programs and because key parameters are likely to differ for those who are eligible for social insurance programs, such as the disabled. Furthermore, differences in social insurance programs often provide natural experiments with exogenous changes in wages or incomes that can be used to estimate labor supply responses. Finally, social insurance often affects different margins of labor supply. For example, the labor supply literature deals mostly with adjustments in the number of hours worked, whereas the incentives of social insurance programs frequently affect the decision of whether to work at all. The empirical work on unemployment insurance (UI) and workers' compensation (WC) insurance finds that the programs tend to increase the length of time employees spend out of work. Most of the estimates of the elasticities of lost work time that incorporate both the incidence and duration of claims are close to 1.0 for unemployment insurance and between 0.5 and 1.0 for workers' compensation. These elasticities are substantially larger than the labor supply elasticities typically found for men in studies of the effects of wages or taxes on hours of work. The evidence on disability insurance and (especially) social security retirement suggests much smaller and less conclusively established labor supply effects. Part of the explanation for this difference probably lies in the fact that UI and WC lead to short-run variation in wages with mostly a substitution effect. Our review suggest that it would be misleading to apply a universal set of labor supply elasticities to these diverse problems and populations.
ER -